For a business
having a large number of transactions it is practically impossible to write all
transactions in one journal, because of the following limitations.
i. Periodical
details of some important business transactions cannot be known, from the
journal easily, e.g., monthly sales, monthly purchases.
ii. Such a system
does not facilitate the installation of an internal check system since the
journal can be handled by only one person.
iii. The journal becomes bulky and voluminous.
Moreover,
transactions can be classified and grouped conveniently according to their
nature, as some transactions are usually of repetitive in nature. Generally,
transactions are of two types: Cash and Credit.
Cash transactions
can be grouped in one category whereas credit transactions can be grouped in
another category. Thus, in practice, the main journal is sub-divided in such a
way that a separate book is used for each category or group of transactions
which are repetitive and sufficiently large in number.
Each one of the subsidiary books is a special journal and a book of original or prime entry. Though the usual type of journal entries are not passed in these sub-divided journals, the double entry principles of accounting are strictly followed.
The number of subsidiary books may vary according to the requirements of each business. The following are the special purpose subsidiary books.
(i) Purchases Book or Purchases Day Book or Inward Invoice Book or Purchases Journal or Bought Journal
(ii) Sales Book or Sales Day Book or Outward Invoice Book or Sales Journal or Sold Journal
(iii) Purchases Return Book or Returns Outward Book or Purchases Return Journal
(iv) Sales Return Book or Returns Inward Book or Sales Return Journal
(v) Bills Receivable Book
(vi) Bills Payable Book
(vii) Cash Book
(1) Special Journal
(i) Purchases Book or Purchases Day Book or Inward Invoice Book or Purchases Journal or Bought Journal: It records only credit purchases of goods by the trader.
(ii) Sales Book or Sales Day Book or Outward Invoice Book or Sales Journal or Sold Journal: It is meant for entering only credit sales of goods by the trader.
(iii) Purchases Return Book or Returns Outward Book or Purchases Return Journal: It records the goods returned by the trader to suppliers.
(iv) Sales Return Book or Returns Inward Book or Sales Return Journal: It deals with goods returned (out of previous sales) by the customers.
(v) Bills Receivable Book: It records the receipts of bills.
(vi) Bills Payable Book: It records the issue of bills.
(vii) Cash Book: It is used for recording only cash transactions i.e., receipts and payments of cash.
: Special Purpose of Books){kind=link}